Imagine you are an entrepreneur in the perfectly competitive gizmo market. Draw a graph showing market supply, market de

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Imagine you are an entrepreneur in the perfectly competitive
gizmo market. Draw a graph showing market supply, market
demand, and equilibrium price and quantity of gizmos in
the long run. Draw a corresponding graph for
the individual gizmo manufacturing firm using the market
equilibrium price, average cost curve, and marginal cost curve. If
you line up the two graphs horizontally, the equilibrium price
should be the same on both graphs.
Now suppose that a crucial component used in the manufacturing
of gizmos becomes cheaper. What impact will this have on the gizmo
industry in the short run, in terms of the
market price, output of an individual firm, and market equilibrium
quantity? What impact will this have on your firm’s profits? What
impact will this have in the long run on
each of these variables? Show graphically and explain your
reasoning.